thesis statement on student loan debt

Student debt forgiveness would impact nearly every aspect of people’s lives

Subscribe to global connection, stephen roll , stephen roll research assistant professor, social policy institute, brown school - washington university in st. louis jason jabbari , and jason jabbari research assistant professor - social policy institute at washington university in st. louis michal grinstein-weiss michal grinstein-weiss nonresident senior fellow - economic studies.

May 18, 2021

Though the emergency relief measures passed in response to the COVID-19 pandemic allowed student loan borrowers to defer their loan payments, student loan debt burdens still loom large for millions of U.S. households. According to the Federal Reserve , the national student debt level in the fourth quarter of 2020 was $1.7 trillion spread across 45 million borrowers—the highest level on record. Given the size of the debt burden, it is perhaps unsurprising that the possibility of student loan forgiveness has become a major policy discussion.

Most recently, President Joe Biden called for $10,000 in student debt forgiveness, while others, such as Senator Elizabeth Warren, have called for as much as $50,000 in debt forgiveness. Some have even called for total debt forgiveness, which would represent a larger amount of spending than the cumulative spending on unemployment insurance over the last 20 years . In a recent poll from the Center for Responsible Lending, 63 percent of respondents supported permanently reducing student loan debt by $20,000. As policymakers grapple with this question, it is important to explore how debt forgiveness might relate to household behaviors.

A student loan forgiveness experiment

To examine the relationship between student debt forgiveness and household behaviors, researchers at the Social Policy Institute conducted a survey experiment that asked participants with student debt to imagine a scenario in which the federal government forgave some amount of their student debt, and then had these participants report on how this would affect their decisions and behaviors. Participants were randomly assigned to one of four conditions that featured different levels of student debt forgiveness:

• Condition 1: $5,000 of student debt forgiveness
• Condition 2: $10,000 of student debt forgiveness
• Condition 3: $20,000 of student debt forgiveness
• Condition 4: All student debt forgiven

Participants could then select different behaviors they would engage in if their student debt were forgiven. The response options were intended to capture a wide range of experiences like working less, changing purchasing behaviors, having children or getting married, saving for different purposes, or returning to school. In total, 1,009 respondents who reported having student debt participated in the experiment.

The amount of debt forgiven matters

We present the results from this experiment in Figure 1. Generally speaking, the most common ways people reported that they would change their behaviors after student debt forgiveness—regardless of the amount forgiven—concerned their balance sheets. Large proportions of student debt holders reported that they would pay down other debts, save more for emergencies, save for a down payment on a home, or save more for retirement.

Figure 1. The relationship between the amount of student debt forgiven and household behaviors

Source: Social Policy Institute

Note: These results are from a survey experiment in which student debt holders were randomly assigned to receive one of four levels of student debt forgiveness. The impacts of the different levels of debt forgiveness were estimated using logistic regression models that also controlled for the amount of student debt held by participants. N=1,009. The brackets on each bar represent the 95 percent confidence interval of each estimate.

Turning to the differences between experimental conditions, we see interesting patterns in the relationship between the amount of debt forgiven and household behaviors. In particular:

• The amount of student debt forgiven was not strongly associated with either working less or paying down other debts.
• Higher levels of student debt forgiveness were associated with higher reported rates of purchasing more/better food, making large purchases like a car or appliance, returning to school, and saving more for emergencies.
• Student debt holders only say they would save more for retirement if all their student debt were forgiven, which implies that many student debt holders would prioritize other behaviors over the long-term goal of saving for retirement.
• Student debt holders were also twice as likely to report that they would have a child if they received $10,000 of debt forgiveness or complete debt forgiveness as they would if they only received $5,000 of debt forgiveness ($20,000 of debt forgiveness did not produce a statistically significant difference from $5,000).
• Higher amounts of student debt forgiveness were associated with other investment behaviors like starting a business or savings for a down payment on a home, as well as a willingness to spend more on entertainment.

The proportion of debt forgiven matters, too

In Figure 2, we shift our focus away from the amount of debt forgiveness to the proportion of debt forgiveness. For this analysis, we converted the amount of forgiveness in each experimental condition to a percentage based on each participant’s reported amount of student debt. That is, someone with $20,000 of student debt assigned to the $5,000 forgiveness condition would have 25 percent of their student debt forgiven, whereas if that person were assigned to the $10,000 forgiveness condition, they would have 50 percent of their debt forgiven. Everyone assigned to Condition 4, as well as everyone assigned to a condition that offered more student debt forgiveness than the amount of debt they owed, were coded as having 100 percent of their student debt forgiven.

Figure 2. The relationship between the proportion of student debt forgiven and household behaviors

Note: These results are from a survey experiment in which student debt holders were randomly assigned to receive one of four levels of student debt forgiveness. The proportions were calculated by diving the amount of student debt held by the proposed amount of student debt forgiven. The impacts of the different proportions of debt forgiveness were estimated using logistic regression models that also controlled for the amount of student debt held by participants. N=1,009. The brackets on each bar represent the 95 percent confidence interval of each estimate.

Interestingly, Figure 2 shows some interesting differences in response patterns when we shift from considering the amount forgiven to the proportion forgiven.

• There is now a clear relationship between the proportion of student debt forgiven and working less—roughly 10 percent of respondents who had 50 percent or more of their student debt forgiven would work less, compared to almost no one having 25 percent or less of their debt forgiven.
• Respondents having less than half of their student debt forgiven were much more likely to report paying down other debts than those with higher proportions of debt forgiven.
• The bulk of respondents saying they would be more likely to have a child if their student debt were forgiven were those who would have all their debt forgiven.
• Respondents became much more likely to report that they would save for emergencies once the proportion of their student debt forgiven exceeds 25 percent, and were more likely to return to school when the proportion exceeds 50 percent.
• Respondents who had all of their debt forgiven were also much more likely to report starting a business as well.

Student debt forgiveness would benefit both high- and low-income households

As a supplemental analysis, we investigated whether or not student debt holders’ incomes influenced the relationship between student debt forgiveness amounts and hypothetical changes in their behaviors. Interestingly, for the vast majority of possible behaviors, both high- and low-income households reported that different amounts of student debt forgiveness would affect them in similar ways. The one primary exception to this was in terms of savings for emergencies—low-income households were much more likely than high-income households to say that they would increase the amount they saved for emergencies as the amount of student debt forgiveness increased.

Implications

These results show two things. First, they show how extensively student debt affects debt holders. The responses to this experiment indicate that student debt is strongly influencing decisions that can have large implications for household economic stability (e.g., emergency savings) and mobility (e.g., saving for a down payment on a home, starting a business). In addition, student debt may be altering the structure of families themselves. Roughly 7 percent of respondents reported that they would be more likely to get married (results not shown) or have children if their student debt were forgiven, indicating that this debt burden is affecting even fundamental decisions about debt holders’ life trajectories.

Second, these results show that the level of student debt forgiveness matters. In particular, setting a student debt forgiveness target too low may not lead to broad-based changes in households’ economic behaviors. However, setting a student debt forgiveness amount at a point where the average debt holder would have more than a quarter of their debt forgiven may yield large changes in savings behaviors, human capital investments (e.g., returning to school), and business starts, without leading to large changes in labor supply.

As policymakers grapple with whether or not to forgive student debt, how much to forgive, and who gets their debt forgiven, it is important to consider the impact of debt forgiveness on household behaviors and how this might differ by the amount of debt held. Our results suggest that larger amounts of debt forgiveness can improve both family stability and upward mobility—especially when these amounts make up a greater proportion of their overall student debt amounts.

A proportional approach to student loan forgiveness

Among those who are considering student debt forgiveness policies, the debate is often framed as a choice between a universal or a targeted policy approach. In this debate, proponents of targeted approaches suggest that universal approaches tend to be inequitable, as they offer benefits to individuals who don’t necessarily need them, and that these approaches tend to be unfair, as these breaks do not apply to previous debt holders who paid off their student loans. As universal approaches tend to be more expensive, proponents of targeted approaches also note fiscal trade-offs, as the money used to pay off the “luxuries” of higher earners could instead be used to help lower earners meet basic needs, such as food and housing.

While the universal approach often focuses on the dollar amount of debt forgiven and the targeted approach often focuses on the income threshold for who would qualify for debt forgiveness, our results suggest that an approach forgiving a proportion of loans should be considered as an option as well. Here, policies could take into account the actual amount of individuals’ debt and forgive a certain proportion of it. This strategy could be applied to either universal or targeted debt forgiveness, or a combination of both approaches. For example, all individuals could have a proportion of their student debt forgiven, and this proportion could increase for lower-income individuals. This approach would have the benefit of addressing the equity concerns of those advocating for a more targeted approach, while still providing real and substantial benefits to student debt holders across the income spectrum.

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Student Loans I: Yes, Something Is Wrong

By  Karen Gross

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The student loan problem seems clear enough on the surface: students are incurring oversized student debt, and they are defaulting on that debt and threatening their ability to access future credit. The approaches to student loan debt collection are fraught with problems, including improper recovery tactics and informational asymmetry regarding repayment options.

But the current public policy conversations miss key issues that contribute to the debt mess, leading to proffered solutions that also miss their mark.

Start with these key facts about student loans: 

The reported student debt loans represent averages, yet the amounts owed can differ dramatically from student to student. That is why solutions like the mandated debt calculator on college websites or the current College Scorecard do not resolve the issues; the disclosure of generic information does not impact student choice meaningfully. 

Another View on Loans

The appropriate level of student loan debt and default for a college's graduates depends heavily on an institution's students and mission, write Jacob Gross and Nicholas Hillman.

Many of the problematic student loans are held by individuals who left college before graduation , meaning they have incurred “debt without diploma.” This reality distorts default statistics, making their indicia of school quality misleading. The cost of education is not necessarily commensurate with the quality of the education received, meaning some students pay more and get less , and we do not have an adequate system for measuring educational quality other than accreditation, which is a deeply flawed process. 

Finally, students and their families are woefully unaware of the myriad repayment options, and therefore forgo existing benefits or are taken advantage of by loan servicers. This occurs because we de-link conversations of “front-end” costs of higher education from “back-end” repayment options and opportunities; students and their families are scared off by the front end without knowing that there is meaningful back-end relief.

Given these facts, it becomes clearer why some of the current government reform suggestions are misguided. Two illustrations: 

First, evaluating colleges on a rating system based on the earning levels of their graduates assumes the overwhelming majority of students graduate and that the employment chosen will be high-paying. But we know that not to be true, and for good reason: some students proudly enter public service or other low-paying but publicly beneficial employment. And, in today’s economy, not all students can find employment directly correlated to their field of study. 

We also know that those from high-income families have greater networking opportunities, given family connections. Yes, some schools offer degrees with little or no value, but the solution to student loan indebtedness does not rest on an earnings threshold.

Second, looking at loan default rates as a measure of the success of a college misses that many colleges welcome students from lower income quartiles, and these students have less collegiate success – understandably, although obviously many are working to improve these statistics. The fact that some of these students do not progress to a degree is not a sign of institutional failure any more than student success at elite institutions is a guarantee of those institutions’ quality.  One approach to consider is linking default rates with the types of students being served by an institution.  But one thing that should not change, to the dismay of some : many of the government student loans should not be based on credit worthiness.   

Not that many years ago, private lenders dominated both the student lending and home mortgage markets. This created obvious parallels between lending in these two spheres. Lenders overpriced for risk, provided monies to borrowers who were not credit-worthy , and had loan products with troubling features like sizable front-end fees, high default interest rates and aggressive debt collection practices. 

In both markets, there was an embedded assumption: real estate values would continue to rise and well-paying employment opportunities would be plentiful for college graduates.

Then several things happened. The federal government took over the student loan market, cutting out the private lender as the middleman on government loans on both the front and back end. The economy took a nosedive that led to diminished home values and lower employment opportunities.  And, when the proverbial bubble burst in the home lending markets, lenders sought to foreclose, only to find that their collateral had diminished in value. 

For student loans, the bubble has not burst and, despite hyperbole to the contrary, it is unlikely to burst because the government -- not the private sector -- is the lender. Indeed, this market is intentionally not focused on credit worthiness; if anything, it awards more dollars to those who have weak credit, specifically to enable educational opportunity. 

And while Congress can debate the interest rates charged on student loans, the size of Pell Grants and the growing default rates, it is highly improbable that the student loan market will be privatized any time soon.

But, for the record, there are already signs that private lenders and venture capitalists have re-entered or are ready to re-enter this market, for better or worse. And if the government’s financial aid offerings are or become less beneficial than those in the open market, we will see a resurgence of private lending offered to students and their families. One caution: history tells us that the risks of the private student loan market are substantial; all one has to do is look at lending improprieties before and since the government became the lender-in-chief and the non-student loan predatory lending that targets our least financially stable borrowers.

There are things that can and should be done to improve the government-run student-lending market to encourage our most vulnerable students to pursue higher education at institutions that will serve them well. Here are five timely and doable suggestions worth considering now:

(1) Lower the interest rates on government-issued subsidized Stafford loans. The government is making considerable profit on student loans, and we need to encourage quality, market-sensitive, fiscally wise borrowing, most particularly among vulnerable students. Student loans to our most financially risky students should remain without regard to credit worthiness (the worthiness of the academic institution is point 2).  Otherwise, we will be left with educational opportunity available only for the rich.

(2) Improve the accreditation process so that accreditors assess more thoughtfully and fairly the institutions they govern, whether that accreditation is regional or national.  Currently, there are vastly too many idiosyncrasies in the process, including favoritism, violation of due process and fair dealing, and questionable competency of some of the accreditors.  And the government has not been sufficiently proactive in recognizing accreditors, despite clear authority to do so.

(3) Simplify (as was done successfully with the FAFSA) the repayment options. There are too many options and too many opportunities for students to err in their selection.  We know that income-based repayment is under-utilized, and students become ostriches rather than unraveling and working through the options actually available.  Mandated exit interviews are not a “teachable moment” for this information; we need to inform students more smartly. Consideration should be given to information at the time repayment kicks in --- usually six months post-graduation.

(4) Incentivize college and universities to work on post-graduation default rates (and repayment options) by establishing programs where they (the educational institutions) proactively reach out to their graduates to address repayment options, an initiative we will be trying on our own campus.  Improvement in institutional default rates could be structured to enable increased institutional access to federal monies for work-study or SEOG, the greater the improvement, the greater the increase. 

The suggestion, then, is contrary to the proffered government approach: taking away benefits . The suggestion proffered here uses a carrot, not a stick – offering more aid rather than threatening to take away aid. Importantly, we cannot mandate a meaningful minimum default rate because default rates are clearly correlated to the vulnerability of the student population, and we do not want to disincentivize institutions from serving first-generation, underrepresented minority and low-income students.

(5) Create a new financial product for parents/guardians/family members/friends who want to borrow to assist their children (or those whom they are raising or supporting even if not biological or step children) in progressing through higher education, replacing the current Parent Plus Loan.  The current Parent Plus loan product is too expensive (both at initiation and in terms of interest rates) and more recently too keyed to credit worthiness . The individuals who most need this product are those who are more vulnerable.  And the definition of “parent” is vastly too narrow given the contours of American families today. 

Home ownership and education are both part of the American dream. Both benefit the individuals and larger society.  How we foster both is, however, vastly different. We need to stop shouting about the shared crisis and see how we can truly help students and their families access higher education rather than making them run for the proverbial hills.

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Is it fair to forgive student loans? Examining 3 of the arguments of a heated debate

Scott Horsley

Student loan borrowers stage a rally in front of The White House on Aug. 25 to celebrate President Biden cancelling student debt. The plan has sparked heated debate, including about its economic fairness. Paul Morigi/Getty Images for We the 45m hide caption

Student loan borrowers stage a rally in front of The White House on Aug. 25 to celebrate President Biden cancelling student debt. The plan has sparked heated debate, including about its economic fairness.

President Biden's plan to forgive hundreds of billions of dollars in student debt is sparking heated debate.

Biden last week announced plans to forgive up to $20,000 in federal student loan debt for Pell Grant recipients and up to $10,000 for others who qualify.

The news will provide relief for borrowers at a time when the cost of higher education has surged.

Student loan forgiveness is politically popular. But not all Democrats are on board

But critics are questioning the fairness of the plan and warn about the potential impact on inflation should the students with the forgiven loans increase their spending.

Here are three key arguments – for and against the wisdom of Biden's decision.

Raising living standards or adding fuel to inflation?

Undoubtedly, student debt is a big burden for a lot of people.

Under Biden's plan, 43 million people stand to have their loan payments reduced, while 20 million would have their debt forgiven altogether.

People whose payments are cut or eliminated should have more money to spend elsewhere – maybe to buy a car, put a down payment on a house or even put money aside for their own kids' college savings plan. So the debt forgiveness has the potential to raise the living standard for tens of millions of people.

Critics, however, say that additional spending power would just pour more gasoline on the inflationary fire in an economy where businesses are already struggling to keep up with consumer demand.

Inflation remains near its highest rate in 40 years and the Federal Reserve is moving to aggressively raise interest rates in hopes of bringing prices back under control.

Not all economists believe the debt forgiveness will do much to fuel inflation.

Debt forgiveness is not like the $1200 relief checks the government sent out last year, which some experts say added to inflationary pressure. Borrowers won't suddenly have $20,000 deposited in their bank accounts. Instead, they'll be relieved of making loan payments over many years.

President Biden announces student loan relief in the Roosevelt Room of the White House in Washington, D.C. on Aug. 24. Olivier Douliery/AFP via Getty Images hide caption

President Biden announces student loan relief in the Roosevelt Room of the White House in Washington, D.C. on Aug. 24.

Because the relief is dribbled out slowly, Ali Bustamante, who's with left-leaning Roosevelt Institute says Biden's move won't move the needle on inflation very much.

"It's just really a drop in the bucket when it come to just the massive level of consumer spending in our very service- and consumer-driven economy," he says.

The White House also notes that borrowers who still have outstanding student debt will have to start making payments again next year. Those payments have been on hold throughout the pandemic.

Restarting them will take money out of borrower's pockets, offsetting some of the additional spending power that comes from loan forgiveness.

Helping lower income Americans or a sop to the rich?

Another big point of contention has to do with fairness.

Forgiving loans would would effectively transfer hundreds of billions of dollars in debt from individuals and families to the federal government, and ultimately, the taxpayers.

Some believe that transfer effectively penalizes people who scrimped and saved to pay for college, as well as the majority of Americans who don't go to college.

They might not mind subsidizing a newly minted social worker, making $25,000 a year. But they might bristle at underwriting debt relief for a business school graduate who's about to go to Wall Street and earn six figures.

Students from George Washington University wear their graduation gowns outside of the White House in Washington, D.C, on May 18. Economists worry President Biden's plan to forgive student loans could encourage more people to take on debt in the hopes of also being forgiven. Stefani Reynolds/AFP via Getty Images hide caption

Students from George Washington University wear their graduation gowns outside of the White House in Washington, D.C, on May 18. Economists worry President Biden's plan to forgive student loans could encourage more people to take on debt in the hopes of also being forgiven.

The White House estimates 90% of the debt relief would go to people making under $75,000 a year. Lower-income borrowers who qualified for Pell Grants in college are eligible for twice as much debt forgiveness as other borrowers.

But individuals making as much as $125,000 and couples making up to $250,000 are eligible for some debt forgiveness. Subsidizing college for those upper-income borrowers might rub people the wrong way.

"I still think a lot of this benefit is going to go to doctors, lawyers, MBAs, other graduates that have very high earnings potential and may even have very high earnings this year already," says Marc Goldwein senior policy director at the Committee for a Responsible Federal Budget.

Helping those in need or making college tuition worse?

Goldwein also complains that the loan forgiveness doesn't address the larger problem of soaring college tuition costs.

In fact, he suggests, it might make that problem worse — like a Band-Aid that masks a more serious infection underneath.

For years, the cost of college education has risen much faster than inflation, which is one reason student debt has exploded.

And now what? The question that follows Biden's student loan forgiveness plan

By forgiving some of that debt, the government will provide relief to current and former students.

But Goldwein says the government might encourage future students to take on even more debt, while doing little to instill cost discipline at schools.

"People are going to assume there's a likelihood that debt is canceled again and again," Goldwein says. "And if you assume there's a likelihood it's canceled, you're going to be more likely to take out more debt up front. That's going to give colleges more pricing power to raise tuition without pressure and to offer more low-value degrees."

The old rule in economics is when the government subsidizes something, you tend to get more of it. And that includes high tuition and college debt.

• college tuition
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Is Rising Student Debt Harming the U.S. Economy?

• For decades, the U.S. government has helped students finance their higher education to bolster the country’s economic competitiveness and national security.
• U.S. student loan debt has ballooned in recent years, outpacing most other forms of consumer borrowing.
• P resident Joe Biden has launched several plans to provide student debt relief, but they have sparked intense opposition and legal challenges.

Introduction

Student loan debt in the United States has grown enormously in recent years and is now one of the largest forms of consumer borrowing in the country. Though the benefits of a college education outweigh the costs in most cases, many graduates are concerned about entering a weak job market and worry that lingering debt could hinder their financial futures. 

Most economists see student loan programs as a sound investment in U.S. workers and essential for maintaining the country’s competitive edge, but questions remain about the appropriate level of federal involvement. A debate has also emerged over whether the government should forgive student loan debt and, if so, how much it should forgive. The Joe Biden administration has introduced several student debt forgiveness plans, but its most sweeping proposal was struck down by the Supreme Court.

How much student debt is there?

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Student debt has more than doubled over the last two decades. As of September 2023, forty-three million U.S. borrowers collectively owed more than $1.6 trillion in federal student loans. Adding private loans brings that amount above $1.7 trillion, so that total student debt exceeds debt from auto loans and credit cards. Only home mortgage debt, at more than $12 trillion , is larger.

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Student debt is growing as more and more students attend college. In the late 1980s and early 1990s, most high schoolers did not enroll at colleges or universities; of those that did, less than half borrowed money to do so. In 2022, almost two-thirds of recent high school graduates were enrolled, and most took out student loans. 

The average student is also taking on more debt: the balance per borrower rose 39 percent from 2008 to 2022, according to U.S. News & World Report . Students are generally borrowing more because college tuition has grown many times faster than income. The cost of college—and resulting debt—is higher in the United States than in almost all other wealthy countries, where higher education is often free or heavily subsidized. Meanwhile, U.S. states pulled back funding for public universities and colleges in the wake of the 2008 financial crisis .

Who owes it?

Roughly one in five Americans holds student debt. Most students graduate with around $30,000 in loans, but a small portion of borrowers hold an outsize share of student debt. More than one-third of the total debt is held by the 7 percent of borrowers who owe more than $100,000, according to the Washington Post . However, borrowers with smaller amounts of debt often have a more difficult time repaying their loans, as higher debt from graduate or professional degrees can pay off with much higher incomes. Students who do not complete their degrees often struggle the most ; their default rate is three times higher than those who graduate.

Additionally, the type of institution makes a difference in how much debt is owed. About half of outstanding student debt is held by people who went to private schools, which enrolled just 23 percent of higher education students in 2021. 

There is also a racial disparity in student borrowing that many experts say is problematic and the result of decades of systemic discrimination. Black college students generally take on more debt than white students, and they are more likely to struggle with loan repayment after graduating, in part because they typically have lower levels of family wealth. Black, Latinx, and American Indian students are all more likely to default on their loans than white students.

Why do students take on debt?

Most U.S. students have an incentive to borrow because higher education is typically required for the highest-paying jobs. A worker with a bachelor’s degree earns 1.8 times the amount a person with a high school diploma does, while those with doctorates or professional degrees earn more than double, according to the U.S. Bureau of Labor Statistics. 

However, analysts caution that the return on investment in terms of future income can vary widely, depending on factors including a student’s major and the institution they attended. A 2019 study [PDF] by Federal Reserve economists found that although a college education still provides a boost in earnings, the increase in wealth a degree provides has declined significantly over the past fifty years, due to the rising cost of college and the increase in other forms of consumer debt.

Why does the government lend to students?

The U.S. government invests in higher education for its people—through need-based tuition grants, student loan programs, veterans’ benefits, and research grants—because an educated and highly skilled workforce promotes national prosperity. Highly educated workers provide greater tax revenues, are generally more productive and civically engaged, and are less reliant on social programs. Moreover, postsecondary education is seen by most experts as fundamental to a dynamic, innovative economy. Major U.S. research universities, such as Duke, Harvard, and Stanford, often anchor regional innovation clusters.

What is the history of U.S. student lending programs?

The federal government began taking a large role in funding higher education after World War II. The Servicemen’s Readjustment Act of 1944, commonly known as the GI Bill, provided tuition assistance and many other benefits, including low-interest home loans, to nearly eight million returning veterans. The program continues to pay tuition for hundreds of thousands of servicemembers and veterans each year. 

However, federal student lending did not begin until the Cold War. In response to the Soviet Union’s launch of Sputnik in 1957, Congress passed the National Defense Education Act, sweeping legislation that created federally funded student loan programs and supported national security–related fields, including science, math, and foreign languages. In 1965, the Lyndon B. Johnson administration expanded federal involvement at all levels of education with the Higher Education Act (HEA), which laid the foundation for the current system of federal student lending. Since then, Congress has passed laws that expand loan eligibility and allow parents to borrow on behalf of their children. 

The federal government also provides need-based aid in the form of Pell Grants, which were established in 1972 and students do not have to repay. But funding levels for the program have not kept pace with the rising cost of college, resulting in more students turning to loans.

The U.S. government used to guarantee or subsidize private loans through the Federal Family Education Loan (FFEL) program, but critics, including President Barack Obama, argued that this was a handout to commercial lenders, and the program was ended in 2010. All federal student loans have since been issued directly by the Department of Education. 

In response to the COVID-19 pandemic, the Donald Trump administration provided tens of millions of student borrowers with temporary relief from making payments on their loans. In one of his first acts in office, President Biden extended the payment moratorium for federal student loan borrowers until October 2021. He also expanded it to include private loans made under the discontinued FFEL program that are in default, closing a loophole that affected more than one million borrowers. The Biden administration extended the freeze multiple times, with the final extension expiring in October 2023. Since then, only half of borrowers have resumed payments; many of the remainder have defaulted or involuntary entered forbearance.  

Some education finance experts say the increase in federal student lending is making college less affordable for many by allowing institutions to artificially inflate tuition. William J. Bennett, the secretary of education under President George H.W. Bush, argued in 1987 that federal aid was shielding colleges from market pressures, allowing them to charge ever increasing prices. The so-called Bennett hypothesis continues to be debated by education experts. A 2014 study found that federal aid led to tuition increases only at private, for-profit schools, though other research [PDF] has established a link between aid and rising tuition at public schools as well.

What is the current debate?

Many experts and policymakers agree that both the rising cost of college and the existing volume of loans need to be addressed. They acknowledge that surging student debt is harming younger generations of students by preventing them from reaching their financial goals while exacerbating racial inequality. While older generations were generally able to pay their way through school, or find jobs that enabled them to pay off their debts, that no longer holds true for recent cohorts, they argue. The combination of soaring tuition costs and the recessions caused by the 2008 financial crisis and the COVID-19 pandemic have particularly affected the millennial and subsequent generations. Additionally, student loans are more difficult to discharge in bankruptcy than other forms of consumer debt, such as from credit cards, because borrowers are required to prove “undue hardship” from their loans in court.

However, experts and policymakers differ in their proposals for how to address the problem. The most recent debate has centered on the issue of loan cancellation: some have called for universal loan cancellation in varying amounts, while others say only targeted relief is warranted. Still other experts have proposed system-wide reforms beyond canceling existing debt.  

Large-scale debt cancellation. Universal debt relief calls for a blanket cancellation of all existing student loans. Other large-scale plans call for forgiving up to $50,000 for all borrowers. Proponents argue that large-scale debt cancellation would help advance racial and socioeconomic equality and boost the economy. Without the burden of student loans, they say, more people will be able to buy homes, take entrepreneurial risks, or save for retirement. Opponents counter that broad cancellation would be unfair to those who successfully paid off their student loans or who avoided debt altogether. They also say it would disproportionately benefit high-earning Americans, such as doctors and lawyers, who may have large debts but would likely not struggle with their payments. Another concern is who would bear the cost, since the price tag is estimated to be in the hundreds of billions to trillions of dollars.

Targeted debt relief . These plans would forgive most or all debt for borrowers who make under a certain income; supporters of targeted relief often advocate for income-driven repayment (IDR) plans. IDRs allow borrowers to pay an amount proportional to their income, and have their remaining balance cleared after ten years assuming they’ve made all qualifying payments. While proponents argue that targeting the lowest-income borrowers is the fairest approach , critics say that it would do little to stop universities from raising tuition and other costs.

Systemic reforms . A 2020 report by the Aspen Institute proposed system-wide reforms such as limiting tuition rates at pub­lic colleges, increasing aid for low-income students, incentivizing employers to offer tuition assistance, and restricting federal-loan-fund distribution to institutions that have a history of low post-graduation employment rates and other poor outcomes for students. Policymakers are now increasing their efforts to treat student loans like any other consumer debt, creating pathways to discharge student debt by filing for bankruptcy . Other experts and lawmakers say public funding should be increased to, for example, make public colleges and universities tuition-free. 

Some analysts say the perception that college is the only path to a well-paying job drives up demand and harms students who could be better served by other forms of education. In recent years, politicians from both major parties, including former President Trump, have advocated increasing access to career and technical education (also known as vocational education) as an alternative to college. Indeed, enrollment in trade programs has increased since 2020, even as enrollment at two- and four-year public institutions is yet to recover from the pandemic.

What has Biden proposed?

In 2022, Biden proposed a landmark executive order to cancel close to one-third of the federal government’s student loan holding, worth $441 billion. His plan would have forgiven up to $20,000 in student debt for Pell Grant recipients and up to $10,000 for non–Pell Grant recipients making less than $125,000 per year. The program was expected to help around forty million borrowers, nearly half of whom would have had their entire debt forgiven. The estimated $400 billion outlay [PDF] drew fierce opposition from critics, who viewed the program as an inflationary burden on taxpayers. In June 2023, the Supreme Court struck down the plan in a 6-3 vote, ruling that the president did not have the statutory authority to cancel student loan debt.  

In response, Biden introduced a new, scaled-down plan to reduce U.S. student loan debt, which launched in August 2023. Under the so-called SAVE plan, borrowers with undergraduate loans could see their monthly payments cut by as much as half, with loan balances forgiven after ten or twenty years of payments, depending on income level. The White House anticipates that the plan will allow borrowers to repay $0.71 per dollar borrowed, though some analysts expect lower repayment rates. Projections of the program’s cost vary, but some place it even higher than that of the initial debt forgiveness plan. (The Biden administration has estimated that it will cost $138 billion over the next ten years.) Biden has also introduced a new process to forgive student loans outright for more than 30 million borrowers, using authority from the HEA. As of April 2024, Biden has canceled a total of $153 billion in student debt for more than four million borrowers.

Opponents raised concerns about the cost of the SAVE plan, though experts say it stands on stronger legal footing than the previous debt forgiveness program. Critics also say that the new plan still burdens taxpayers and does little to reduce rapidly rising tuition costs. Some progressive lawmakers, while applauding the plan, say that it is not radical enough to fight the spiraling debt crisis. Meanwhile, many analysts point out that any plan that aims to broadly cancel debt relief is likely to face legal challenges , regardless of its legislative origin.

To other experts, student loan forgiveness would fail to address systemic issues. CFR’s Roger W. Ferguson Jr. writes that such programs miss “the fundamental weaknesses of higher education, namely an unacceptably low completion rate, overdependence on loans to attend college, and high and rapidly increasing costs.” He also pushes for upgrades to “modernize” the system used to manage student loans, which he says could expedite both loan forgiveness and repayment, saving borrowers up to $100 billion.

Still, proponents say IDRs such as SAVE are among the best options to reduce student debt. They argue that the Biden administration should now focus on reducing administrative hurdles to signing up for the program. A 2022 study by the Government Accountability Office found that thousands of borrowers who were eligible for forgiveness under existing IDRs were still making payments on their loans, and that the Department of Education “hasn’t done enough to ensure that all eligible borrowers receive the forgiveness to which they are entitled.”

Recommended Resources

CFR expert Roger W. Ferguson Jr. explains how the Biden administration can modernize the federal student loan experience .  

The Congressional Research Service explores federal student debt relief [PDF] in the context of the COVID-19 pandemic.

Forbes Advisor breaks down current statistics on student debt. 

The College Board examines trends and patterns [PDF] in student borrowing. 

The Brookings Institution’s Adam Looney, David Wessel, and Kadija Yilla analyze who owes student debt and who would benefit from debt forgiveness.

The Aspen Institute lays out proposals to mitigate the student debt crisis without canceling loans.

Rhea Basarkar, Noah Berman, Jacqueline Jedrych, Anshu Siripurapu, Mia Speier, and Steven J. Markovich contributed to this Backgrounder.

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Student Loan Debt Thesis Statement

Student loan debt has become a major issue in recent years, as the cost of university education has risen and more students have been forced to take out loans to cover their costs. The average student loan debt in the United States is now over $37,000, and the total amount of outstanding student loan debt is estimated to be over $1 trillion. This has led to a number of problems for both individuals and the economy as a whole.

Individuals with high levels of student loan debt often find it difficult to make ends meet, as they are struggling to repay their loans while also covering other living expenses. This can lead to financial difficulties and even default on their loans, which can damage their credit score and make it difficult to get access to other forms of credit. Student loan debt can also lead to stress and anxiety, as borrowers worry about how they will ever be able to repay their loans.

The high level of student loan debt in the United States has also had a range of macroeconomic impacts. For example, it is thought to be one of the reasons why young people are delaying buying homes, as they simply cannot afford to take on additional debt. This has knock-on effects for the housing market and the economy as a whole. Student loan debt is also thought to be one of the reasons why many graduates are choosing to work in lower-paid jobs, as they need to earn enough money to make their loan repayments. This can have an impact on productivity and economic growth.

The student loan debt crisis is a complex issue with no easy solutions. However, there are a number of things that can be done to try and alleviate the problem. For example, universities could work to reduce the cost of attendance, so that fewer students need to take out loans in the first place. Alternatively, government policy could focus on making it easier for borrowers to repay their loans, for example by introducing income-based repayment plans.

Going to college is often advised as the next step in education after high school, but is it really that simple? The most significant issue for students today is money. Nowadays, receiving a scholarship would be the greatest method to go through college without accumulating student loan debt later on. Even though financial aid is available for those seeking higher education, not all of them will qualify for financial assistance.

The answer to this money issue is to have a scholarship. According to Student Debt Relief, “In 2019, the average student loan debt was $30,063.88” ( Student Debt Relief). This amount of debt can be a tremendous amount for someone just starting out in college or even after they have graduated. The number of students with debt is also increasing every year.

Student Debt Relief states that “67% of bachelor’s degree recipients from public and nonprofit colleges had student loan debt in 2018” ( Student Debt Relief). This percentage has increased over the years, which means more and more students are struggling with finding ways to pay off their loans. Scholarships can help with this problem because they do not have to be paid back.

There are many scholarships available for students, but they can be hard to find. Scholarships.com is a website that “maintains the largest database of private and external scholarships on the Internet” ( Scholarships.com). This website can help connect students with different scholarship opportunities. Another way to find scholarships is by talking to your guidance counselor at school. They will have information on local scholarships that may be available to you. There are also many websites and books that list different scholarships that may be a fit for you.

It is important to start looking for scholarships as early as possible so you do not miss any deadlines. It is also important to read all of the instructions carefully and make sure you are eligible for the scholarship before you apply. Once you have found a scholarship or multiple scholarships that you are eligible for, the next step is to fill out the application.

The application process can be time-consuming, but it is important to take your time and fill it out correctly. Make sure you answer all of the questions truthfully and completely. Some scholarships may require an essay, so make sure you follow all of the instructions and format your essay correctly.

After you have submitted your application, all you can do is wait to see if you have been awarded the scholarship. If you are not awarded the scholarship, do not be discouraged. There are many other scholarships available, and you can always reapply for the same scholarship next year.

Receiving a scholarship can take a load off of your shoulders financially, and it can also help you focus more on your studies. If you are struggling to find ways to pay for college, look into scholarships as soon as possible. There are many different scholarships available, so you are sure to find one that is a fit for you.

Do not let the burden of student loan debt hold you back from getting a college education. Scholarships can help you achieve your dreams of going to college without the worry of how you will pay for it.

It puts them in a bind since they will not be able to meet the requirements. As a result, they must take out student loans to cover their education costs. It is the start of a long road that leads to student loan debt difficulties because they have no other option but to borrow money through Sallie Mae. Today, the most popular loan provider is Sallie Mae, which was formed as a private firm in 1972 and became publicly listed in 2004.

Student loan debt has been on the rise in America over the past few decades. In 1987, outstanding student loan debt was around $40 billion. By 2006, it had increased to nearly $200 billion. Student loan debt is now the second-largest type of consumer debt in the United States, after mortgage debt. The average student loan borrower owes more than $28,000. More than 40 million Americans have student loan debt.

Student loan debt affects not just borrowers, but also their families and the economy as a whole. Student loan debtors are less likely to buy homes and cars, and they are also more likely to default on their loans. This can have a ripple effect on the economy, as fewer people buying homes means fewer construction jobs and fewer people buying cars means fewer jobs in the auto industry.

The problem of student loan debt is compounded by the fact that many graduates are unable to find jobs that pay enough to allow them to make their loan payments. In fact, nearly half of all recent college graduates are unemployed or underemployed. And of those who are employed, many are working in jobs that do not require a college degree.

The combination of high unemployment and low-paying jobs has led to an increase in student loan defaults. In 2009, more than 6 percent of student loan borrowers defaulted on their loans. This is the highest default rate since 1998.

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Student Debt - Essay Samples And Topic Ideas For Free

Student debt refers to the cumulative outstanding loans taken out to cover educational costs, which has become a significant issue, especially in the United States. Essays could delve into the causes and consequences of escalating student debt, its impact on economic mobility, and proposed solutions to alleviate the burden of student debt on individuals and society. We have collected a large number of free essay examples about Student Debt you can find at PapersOwl Website. You can use our samples for inspiration to write your own essay, research paper, or just to explore a new topic for yourself.

More than Stress Biological Effects of Student Debt

Introduction: ""Student debt is on the rise is a statement made by every article that examines student debt. Studies that consider the effects of student debt on college students have concluded that that those who take out loans and gain debt are affected negatively by the need to pay those debts and having to add that to their long list of responsibilities. Thus, the popular notion is that student loans make these students stressed and full of anxiety even leading […]

Decrease Student Debt as Step for the Future of America

America has always been known as one of the freest and most prosperous countries that exist in our modern world today. Freedom is the staple of our country and is what distinguishes us from other places in the world. We, as citizens in the United States, enjoy an incredibly vast array of rights and laws from which we benefit every day, even if we are not actively aware of it. There are so many reasons why we can take pride […]

Why College Matters

The price of attending college has risen dramatically over the past few decades, so much that it causes many second thoughts and doubts from young adults who preferred to attend. These doubts are mostly centered around the amount of student debt loan they might be burdened with. Americans now have 1.3 trillion in student debt, this is a crisis that many people have been said will be solved with free community and state college. State and community college should be […]

We will write an essay sample crafted to your needs.

Reflections on the Worth of College and Student Debt

The unemployment levels for high school and college graduates alike have reached record heights. This surfaces the hugely controversial argument: Is college worth it? With student debt crossing detrimental lines and acceptance rates at all-time lows, many people are starting to lean towards the negative side of this ongoing argument. Although college does teach more than just the basics for scholastic intelligence, my beliefs have started to stray towards the negative side as well. Unless you need a college education […]

Why College Tuition should be Free

There are so many reasons why college should be free for everyone. First there would be fewer people that would need to have government assistance. Also with free college education there would be smarter people making better decisions that could help solve our most difficult challenges. Students won’t graduate without a job and $ 30,000 student loan debt. Finally, most jobs in today's society ethier need some kind of degree, or technical training of some sort. This is why I […]

Is College Worth the Expense?

This paper will be debating whether the cost of college is worth the expense. There are several factors that go into debating whether you should attend college or not. The stress associated with financing college in the United States has raised a big red flag for many people. Not only can college put you in debt, but it can also cause you a lot of stress. As many people know college is very pricey. You can go several thousand dollars […]

The Economic Burden: Analyzing the Impact of Student Debt on Individuals and Society

Within the realm of higher education, a looming specter casts its shadow—a financial burden that not only burdens individuals but also reverberates throughout society. Student debt, an omnipresent reality for many, holds sway over both personal finances and broader economic structures. To truly grasp the extent of this issue, one must navigate the intricate network of factors that contribute to the economic weight of student loans. At the heart of this issue lies the individual experience, where the repercussions of […]

Breaking the Chains: Strategies for Addressing and Alleviating the Student Debt Crisis

In the labyrinth of higher education, a formidable specter haunts the dreams of countless students: the student debt crisis. Like chains forged from the weight of financial obligations, it binds aspirations and stifles progress, leaving a generation burdened with unprecedented economic strain. Yet, amid this daunting challenge, lies a tapestry of innovative strategies waiting to be woven, promising liberation from the shackles of debt. Central to any effective approach is a deep understanding of the crisis's roots. The soaring cost […]

The Double-Edged Sword of Student Loans in Higher Education

In the expansive domain of advanced learning, the terrain is profoundly influenced by the availability and ramifications of student loans, a fiscal apparatus crafted to bridge the chasm between aspiration and actuality for multitudes aspiring toward tertiary education. While student loans have unquestionably unlocked doors for myriad individuals who may otherwise have been unable to afford college, they also carry ramifications that reverberate through diverse facets of access, affordability, enrollment rates, scholastic achievement, and post-graduation outcomes. This discourse delves into […]

How to Write an Essay About Student Debt

Understanding the issue of student debt.

Before writing an essay about student debt, it's essential to understand the extent and implications of this issue. Student debt refers to the money borrowed to finance higher education, which can include tuition, room and board, and other related expenses. Begin your essay by outlining the current state of student debt, including the average amount of debt per student and the total debt nationwide. Discuss the factors that have contributed to the rise in student debt, such as the increasing cost of college tuition, changes in government funding for education, and the broader economic context. It's also important to understand the impact of student debt on individuals, including its effects on financial stability, career choices, and mental health.

Developing a Thesis Statement

A strong essay on student debt should be centered around a clear, concise thesis statement. This statement should present a specific viewpoint or argument about student debt. For example, you might explore the socioeconomic implications of student debt, analyze the effectiveness of current loan forgiveness programs, or argue for a particular policy solution to address the student debt crisis. Your thesis will guide the direction of your essay and provide a structured approach to your topic.

Gathering Supporting Evidence

To support your thesis, gather evidence from various sources, such as economic studies, government reports, and personal testimonies. This might include data on the long-term financial impact of student debt, analysis of the demographic disparities in student debt, or case studies of individuals or communities particularly affected by it. Use this evidence to support your thesis and build a persuasive argument. Be sure to consider different perspectives and address potential counterarguments.

Analyzing the Impact of Student Debt

Dedicate a section of your essay to analyzing the impact of student debt. Discuss how it affects individual choices and opportunities, including career decisions, homeownership, and family planning. Consider the broader economic and social implications, such as the potential for student debt to exacerbate income inequality or influence economic growth. Also, explore the psychological effects of carrying large amounts of debt over a prolonged period.

Concluding the Essay

Conclude your essay by summarizing the main points of your discussion and restating your thesis in light of the evidence provided. Your conclusion should tie together your analysis and emphasize the importance of addressing student debt as a significant issue facing society. You might also want to suggest areas for future research, policy changes, or action steps to mitigate the impact of student debt.

Reviewing and Refining Your Essay

After completing your essay, review and refine it for clarity and coherence. Ensure that your arguments are well-structured and supported by evidence. Check for grammatical accuracy and ensure that your essay flows logically from one point to the next. Consider seeking feedback from peers, educators, or financial experts to further improve your essay. A well-written essay on student debt will not only demonstrate your understanding of the issue but also your ability to engage with complex economic and social topics.

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Supreme court rebuffs biden administration plea to restore multibillion-dollar student debt plan.

Associated Press

WASHINGTON – The Supreme Court on Wednesday kept on hold the latest multibillion-dollar plan from the Biden administration that would have lowered payments for millions of borrowers, while lawsuits make their way through lower courts.

The justices rejected an administration request to put most of it back into effect. It was blocked by the 8th U.S. Circuit Court of Appeals.

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In an unsigned order, the court said it expects the appeals court to issue a fuller decision on the plan “with appropriate dispatch.”

The Education Department is seeking to provide a faster path to loan cancellation, and reduce monthly income-based repayments from 10% to 5% of a borrower’s discretionary income. The plan also wouldn’t require borrowers to make payments if they earn less than 225% of the federal poverty line — $32,800 a year for a single person.

Last year, the Supreme Court’s conservative majority rejected an earlier plan that would have wiped away more than $400 billion in student loan debt.

Cost estimates of the new SAVE plan vary. The Republican-led states challenging the plan peg the cost at $475 billion over 10 years. The administration cites a Congressional Budget Office estimate of $276 billion.

Two separate legal challenges to the SAVE plan have been making their way through federal courts. In June, judges in Kansas and Missouri issued separate rulings that blocked much of the administration’s plan. Debt that already had been forgiven under the plan was unaffected.

The 10th U.S. Circuit Court of Appeals issued a ruling that allowed the department to proceed with a provision allowing for lower monthly payments. Republican-led states had asked the high court to undo that ruling.

But after the 8th Circuit blocked the entire plan, the states had no need for the Supreme Court to intervene, the justices noted in a separate order issued Wednesday.

The Justice Department had suggested the Supreme Court could take up the legal fight over the new plan now, as it did with the earlier debt forgiveness plan. But the justices declined to do so.

“This is a recipe for chaos across the student loan system,” said Mike Pierce, executive director of the Student Borrower Protection Center, an advocacy group.

“No court has decided on the merits here, but despite all of that borrowers are left in this limbo state where their rights don’t exist for them,” Pierce said.

Eight million people were already enrolled in the SAVE program when it was paused by the lower court, and more than 10 million more people are looking for ways to afford monthly payments, he said.

Sheng Li, litigation counsel with the New Civil Liberties Alliance, a legal group funded by conservative donors, applauded the order. “There was no basis to lift the injunction because the Department of Education’s newest loan-cancellation program is just as unlawful as the one the Court struck down a year ago,” he said in a statement.

Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.